How do ISA accounts work?

foxblade

Hey,

I have opened my first isa (I know it's late in the year but I can max it by April), but I am slightly confused how the accounting works. As you can only pay in £3,600 (£5,100) does that mean when the next year comes along you have to open another account? and when you open the next account will you only be able to see that years details? I'm a bit worried its going to become unmanageable :rotfl:

Or, is it that if you decide to stay with the same company, you continue to pay in the money and they just put it in a separate pot, but you see the full total and it's under the same account?

What do others see when they go to their isa accounts?

Thanks,

:think:

apt

You can add upto £5,100 to your existing ISA in the next tax year 2010-11(you'll have one balance and one account number) or put it in another ISA. You can also transfer ISAs if your ISA allows it (most fixed-rates don't during the term) and the ISA you want to transfer to accepts transfers. If you have a variable rate ISA you should keep checking that the rate is competitive.

foxblade

ok, so you have your account and all the isa's are there with a total of how much you have in them? Also if you take the money out do you take it out of each one or do you for example take a £9000 it will take a bit out of the first one, then the second one and so on?

Thanks,

apt

Ideally ISAs are for long term saving as if you take money out you cannot top it up if you've already paid-in the maximum allowance. If you do want or need to withdraw take the money from the ISA with the lowest interest rate unless there are charges or penalties for withdrawals.

Lansdowne

If you already know you will need to take money out at a set time, it may be better not to put that money in an ISA at all - as other accounts may pay higher rates even after tax.

If you need to take some out, don't take it from the current year's amount because the ISA limit doesn't allow you to replace it the same year.

Lokolo

foxblade wrote: »

ok, so you have your account and all the isa's are there with a total of how much you have in them? Also if you take the money out do you take it out of each one or do you for example take a £9000 it will take a bit out of the first one, then the second one and so on?

Thanks,

They aren't split up into years or whatever. Its just like a normal savings account but with benefits attached to it.

So this year I have 1 ISA with £6600 in it, and one with £3,600 in it. The first one was a few years back when the limit was £3000, I then added £3,600 to it. This year I opened a separate one to add my £3,600 with it.

If I wanted I could move one of the ISA accounts to another one and so just have one ISA with £10,200 in it.

If I wanted to withdraw some money it wouldn't matter where I took it from.

foxblade

Thanks, no I wasn't planning on taking any money out of it at all, I was just trying to get my head around the whole fact that they are separate isa's but are actually one account, I couldn't visual it in my mind so was getting a bit confused.

InMyDreams

Lansdowne wrote: »

If you need to take some out, don't take it from the current year's amount because the ISA limit doesn't allow you to replace it the same year.

Surely it doesn't make any difference which ISA (if you have more than one) that you take it out of (assuming all at the same rate of interest). The limit is in what you put in, not what you take out. You can't 'replace' previous years' money either without using up the current year's allowance.

RedCanadaHat

what is the difference between an ISA and a savings account? I've had both for about 3 years and I don't notice any difference..

foxblade

ISA are tax free, and have a maximum limit.

Lansdowne

InMyDreams wrote: »

Surely it doesn't make any difference which ISA (if you have more than one) that you take it out of (assuming all at the same rate of interest). The limit is in what you put in, not what you take out. You can't 'replace' previous years' money either without using up the current year's allowance.

Yeah you're right, I was thinking of a different situation not the one asked.
Apologies.